Oil Extends Losses as China’s Outbreak Imperils Demand Outlook
2022.04.25 09:11
Oil Extends Losses as China’s Outbreak Imperils Demand Outlook
(Bloomberg) — Oil pushed lower at the start of the week on concern that a spreading Covid-19 outbreak in China will weigh on global demand.
West Texas Intermediate futures dropped almost 2% to trade near $100 a barrel after capping a weekly loss. Shanghai reported record daily virus deaths over the weekend, while authorities in Beijing warned of a silent spread. The world’s biggest crude importer is heading for the worst oil demand shock this month since the lockdown in Wuhan in the early days of the pandemic.
The virus resurgence adds another source of volatility to the oil market that’s been whipsawed by Russia’s war in Ukraine. The conflict has raised concerns about crude supply and fanned inflation just as most economies emerged from the worst of the pandemic and were looking to encourage economic growth.
China has implemented lockdowns in a number of cities across the country as it pursues a Covid Zero strategy. Demand for gasoline, diesel and aviation fuel in April is expected to slide 20% from a year earlier, according to people with inside knowledge of the country’s energy industry. That’s equivalent to a drop in crude oil consumption of 1.2 million barrels a day, they said.
Brent remains in backwardation — a bullish structure where near-dated contracts are more expensive than later-dated ones — but has narrowed considerably since early March. The prompt timespread for the benchmark was 52 cents a barrel in backwardation, compared with $4.64 on March 2.
©2022 Bloomberg L.P.
